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Thursday, October 10, 2013

Global wealth inequality

Global wealth highest in history despite downturn

Despite the financial crisis of 2008 and the difficulties in the
Eurozone, global wealth has more than doubled since 2000, reaching over
£150 trillion, according to the latest global wealth report from Credit
Suisse.
Economic growth in developing countries and rising populations have
played a significant part in the figures. Aggregate total wealth
rocketed past the pre-crisis peak in 2010 and has been climbing higher
ever since. Average wealth per adult has reached £32,167 after a rise of
4.9 per cent during the year to mid-2013.
Change in household wealth by region 2012-2013:

Region

Total Wealth 2013 (USD billion)

Percentage Change 2012-13

Africa

2,711

1.2

Asia-Pacific (including China and India)

73,879

-3.7

Europe

76,254

7.7

Latin America

9,139

3.6

North America

78,898

11.9

World

240,881

4.9

The countries experiencing the largest wealth gains of over £620bn
included the US, Japan, China, Germany and France. The UK came sixth in
total wealth gains with over £125bn.
A large part of the gains made in the US were due to rising house
prices and a strengthening equity market driving up the Dow Jones. The
US increased the global wealth stock by £5.05 trillion, a 54 per cent
increase since the downturn of 2008.
Switzerland remains the richest nation in the world, on average, with
wealth rising to £319,805 per adult. Australia, Norway and Luxembourg
all saw an increase in wealth per adult and retained their respective
second, third and fourth places from 2012.
In terms of global distribution, once debts have been subtracted,
£2493 in assets will place an adult in the top half of the worlds
wealthiest citizens. Wealth of £46,000 is required for an adult to reach
the top 10 per cent of global wealth holders, while personal wealth of
£469,422 places an adult in the top one per cent.
The report forecasts that wealth will rise by close to 40 per cent in
the next five years with emerging markets to increase their share of
global wealth to 23 per cent by 2018. China is expected to see household
wealth dramatically, growing by 10.1 per cent over the next five years.

- See more at:

Top 1% own 41%; top 10% own 86%; bottom half own just 1%

Just 8.4% of all the
5bn adults in the world own 83.4% of all household wealth (that’s
property and financial assets, like stocks, shares and cash in the
bank). About 393 million people have net worth (that’s wealth after all
debt is accounted for) of over $100,000, that’s 10% own 86% of all
household wealth! But $100,000 may not seem that much, if you own a
house in any G7 country without any mortgage. So many millions in the
UK or the US are in the top 10% of global wealth holders. This shows
just how little two-thirds of adults in the world have – under $10,000
of net wealth each and billions have nothing at all.

This is not annual
income but just wealth – in other words, 3.2bn adults own virtually
nothing at all. At the other end of the spectrum, just 32m people own
$98trn in wealth or 41% of all household wealth or more than $1m each.
And just 98,700 people with ‘ultra-high net worth’ have more than $50
million each and of these 33,900 are worth over $100 million each. Half
of these super-rich live in the US.

All this is in a new
global wealth report published Credit Suisse Bank and authored by
Professors Anthony Shorrocks and Jim Davies – see the report here (global wealth report and the database wealth database).
The professors find that global wealth has reached a new all-time high
of $241 trillion, up 4.9% since last year, with the US accounting for
most of the rise. Average wealth hit a new peak of $51,600 per adult
but the distribution of that wealth is wildly unequal.

There is nothing new in this report one sense because Tony Shorrocks previously authored a UN report back in 2010 (see my post, http://thenextrecession.wordpress.com/2010/01/10/20/)
that found virtually the same wealth inequality and Branko Milanovic
also found similar figures in various World Bank studies. But what is
also interesting is that Professor Shorrocks finds that there is little
or no social mobility between rich and poor over generations – 87% of
people stay rich or poor, hardly moving up or down the wealth pyramid.

This inequality is mirrored within each country (see UK wealth distribution).
In the UK, aggregate total wealth (including private pension wealth but
excluding state pension wealth) of all private households in Great
Britain was £10.3 trillion. And the wealthiest 10 per cent of households
were 4.4 times wealthier than the bottom 50 per cent of households
combined. The wealthiest 20 per cent of households owned 62 per cent of
total aggregate household wealth.

Moreover, according to
the Credit Suisse report, the ‘American dream’ or the British idea of
‘rags to riches’ is a myth. Two-thirds of American adults are in the
same wealth decile as their parents were. Even globally, “while some
individuals do alternate wildly between rags and riches, many stay
for their whole lifetime in the same wealth neighborhood for people of
their age. Dividing the population into wealth quintiles, about half the
population remains in the same quintile after ten years and we estimate
that at least a third would be in the same quintile after thirty
years.”

Global wealth is
projected to rise by nearly 40% over the next five years, reaching $334
trillion by 2018. Emerging markets will be responsible for 29% of the
growth, although they account for just 21% of current wealth, while
China will account for nearly 50% of the increase in emerging economies’
wealth. Wealth will primarily be driven by growth in the middle
segment, but the number of millionaires will also grow markedly over the
next five years.

All class societies have generated extremes of inequality in wealth
and income. That is the point of a rich elite (whether feudal
landlords, Asiatic warlords, Incan and Egyptian religious castes, Roman
slave owners etc) usurping control of the surplus produced by labour.
But past class societies considered that normal and ‘god-given’,
Capitalism on the other hand talks about free markets, equal exchange
and equality of opportunity. The reality is no different from previous
class societies.